Mendonca v Matthews Folbigg Pty Ltd

1. [1]

   HER HONOUR: On 16 April 2021 the Court heard evidence and submissions relevant to two Notices of Motion: the first filed by the defendants on 9 October 2020; and the second filed by the plaintiff on 16 November 2020. Orders and reasons were reserved until today.

2. [2]

   Both Motions relate to proceedings commenced by the plaintiff by Statement of Claim ("SoC") filed on 28 January 2020. An Amended Statement of Claim ("ASoC") was filed on 15 July 2020. The Motion filed on behalf of the defendants seeks orders dismissing the plaintiff's claim, or ordering the proceedings permanently stayed, or striking out the ASoC. The Motion filed on behalf of the plaintiff seeks leave to file a proposed Further Amended Statement of Claim ("PFASoC"). Both Motions raise a common issue: whether the plaintiff's case as pleaded in the PFASoC would constitute an abuse of process having regard to prior proceedings between the plaintiff and two other parties.

3. [3]

   On the date of hearing the parties submitted that it was the plaintiff's Motion to which the Court should give attention since, in filing that Motion, the plaintiff signalled an acceptance of the force of the defendants' arguments, and there was no real issue taken with the defendants' Motion. That is the approach the Court has adopted.

The Background to the Motions

1. [4]

   The Motions relate to the purchase of a property at Galston that settled on 31 January 2014. Mark Tonna and Lorraine Tonna ("the Tonnas"), the proposed buyers of the property, contracted to purchase the Galston house and land, but ran into difficulties with finance pending the sale of a property they owned at Schofields. A plan was developed whereby the Tonna purchase would proceed, but on the understanding that the plaintiff would simultaneously buy the Galston property from the Tonnas, with the purchase monies paid by the plaintiff to the Tonnas used by them to make up the shortfall in their funding, allowing them to complete the Galston purchase. The funds that the Tonnas contributed to the settlement in turn formed part of the monies used by the plaintiff to complete her purchase.

2. [5]

   The first defendant, Matthews Folbigg, is a firm of solicitors; Stewart Gough, the second defendant is a director of the first defendant. The firm and Mr Gough acted for the Tonnas in relation to the purchase of the Galston property. When the Tonnas were unable to complete the purchase due to a shortfall in finance, and were subject to a Notice to Complete from the vendor, the Tonna's financial adviser, the plaintiff's husband, Gerard Mendonca, suggested that the plaintiff could assist them to complete the purchase.

3. [6]

   The proposal was, broadly, for the plaintiff to complete the purchase of the Galston property, with the Tonnas paying all expenses connected with her purchase, and the plaintiff later conveying the Galston property back to the Tonnas. The proposal was agreed by all participants, and the first and second defendants were engaged to act for the plaintiff on the purchase of the Galston property from the Tonnas.

4. [7]

   Thus the defendants held a retainer to act for both the Tonnas in their purchase of the Galston property, and for Dr Mendonca in her simultaneous purchase of the same property from the Tonnas.

5. [8]

   The sale transactions were completed on 31 January 2014.

6. [9]

   Thereafter, a dispute arose between the plaintiff and the Tonnas as to the terms upon which the plaintiff purchased the Galston property. The Tonnas contended that the plaintiff was to hold the legal title to the property on trust for their sole benefit until the sale of a property owned by Mr and Mrs Tonna at Schofields permitted them to repay the plaintiff's contribution to the purchase monies and, thereafter, on direction from them, the plaintiff was to transfer the Galston property back to the ownership of the Tonnas.

7. [10]

   The plaintiff denied that she was a trustee for the Tonnas, contending that there was no legally binding agreement for her to hold the Galston property on trust for them. Her position was that she bought the Galston property from the Tonnas, thus assisting them to avoid the substantial financial loss that would have followed should they have been unable to complete the contract for the purchase of the Galston property, and she held the Galston property for her own benefit. Such of the purchase monies for the Galston property as had been contributed by the Tonnas, Dr Mendonca asserted was a loan from them to her.

8. [11]

   The whole dispute came before this Court in 2019 when Ward CJ in Eq heard and determined the competing claims, holding generally in favour of the Tonnas: Tonna v Mendonca [2019] NSWSC 1849 ("the 2019 judgment"). That judgment was handed down on 20 December 2019.

9. [12]

   A month or so later, on 28 January 2020, the plaintiff filed the SoC that commenced the present proceedings, raising claims of professional negligence amongst other complaints against the first and second defendants, based upon asserted deficiencies in their conduct of the sale and purchase agreements relating to the Galston property on the plaintiff's behalf. That claim was filed three days before the date which marked the expiration of six years after the contentious sale of the Galston property settled.

10. [13]

    The plaintiff also filed an appeal against the 2019 judgment of Ward CJ in Eq, commencing the appeal by Notice filed on 17 March 2020. The appeal was later, on 26 August 2020, dismissed by the Court of Appeal: Mendonca v Tonna [2020] NSWCA 196. An application for leave to appeal to the High Court was also dismissed.

11. [14]

    On 15 July 2020, the plaintiff filed the ASoC against the defendants (not serving it on them until 4 September 2020). As at the date of filing, she was represented by HWL Ebsworth, although that firm filed a Notice of Ceasing to Act a week later.

12. [15]

    Subsequently, the defendants wrote to the plaintiff, identifying potential difficulties with the ASoC, and inviting her to withdraw the current proceedings. When that did not occur, the defendants filed the present Motion. The plaintiff's response was to file her Motion of 16 November 2020, seeking leave to file a PFASoC. As the defendants submit, implicitly, in seeking to file the PFASoC, the plaintiff accepted the force of the matters raised by the defendants concerning the ASoC.

13. [16]

    The defendants contend, broadly, that the plaintiff is seeking to relitigate matters already determined in the 2019 judgment and is precluded from doing so by principles of issue estoppel, or because the claim constitutes an abuse of process. The plaintiff contends that her proposed claim, as articulated by the PFASoC, is not one encompassed by the 2019 judgment and she should be granted leave to file it.

14. [17]

    Her Honour's 2019 judgment is the essential background to the Motions now brought before the Court. This judgment assumes familiarity with her Honour's detailed account of the background to the dispute between the Tonnas and Dr Mendonca, and her consideration and resolution of the issues to be determined.

The Plaintiff's Notice of Motion

1. [18]

   The plaintiff asks the Court to make the following order:

The Evidence

1. [19]

   The plaintiff relies on her affidavit sworn 7 December 2020.

2. [20]

   The first and second defendants rely upon the affidavit of Dougal James Langusch sworn 9 October 2020 together with a volume of documentary material, Ex. DJL-1.

The Plaintiff's PFASoC

1. [21]

   Against the background of the Tonna's stalled purchase of the Galston property, and the Notice to Complete that had been served on them with respect to the settlement of their purchase, the plaintiff seeks to advance the following case against the defendants in the PFASoC.

2. [22]

   At some point between 23 and 29 January 2014 Mr Gough and Mr Tonna, taking up the suggestion of the plaintiff's husband, developed a plan to ensure that the Tonna's could complete the purchase of the Galston Property. The plaintiff was to purchase the Galston Property, with the Tonnas paying all associated expenses, and the thereafter conveying the property back to the Tonnas. This plan is referred to as the "Substitution Solution".

3. [23]

   The plaintiff retained Matthews Folbigg to provide legal services during the transaction. In particular, the plaintiff asserts in the PFASoC that "Mr Gough's agreement to act for Dr Mendonca on Dr Mendonca's purchase of the Galston Property was for the purposes of giving effect to the Substitution Solution".

4. [24]

   By 30 January 2014, the Substitution Solution was varied ("the Amended Substitution Solution") so that, whilst the Tonnas remained the named purchasers under the purchase contract they had entered for the Galston property, they also entered into a separate contract for the sale and purchase of the Galston Property with the plaintiff. That contract was entered into and completed on 30 January 2014, with ownership of the Galston property passing to the Tonnas, and immediately thereafter from them to the plaintiff.

5. [25]

   In completing her purchase from the Tonnas, the plaintiff relied upon $438,260 in funds contributed to the purchase price by the Tonnas.

6. [26]

   In the ASoC the plaintiff asserted that, in purchasing the Galston property, she intended to obtain both the legal and beneficial title to the Galston Property, to the exclusion of any other person including the Tonnas, so that she could use it as an investment property, potentially leased to a tenant. She said that she relied upon the defendants to prepare an agreement to ensure that outcome.

7. [27]

   In the PFASoC the plaintiff asserts that the defendants breached contractual and common law duties of care to her by failing to advise her that her purchase from the Tonnas was likely to give rise to the Tonnas having a proprietary interest in the Galston Property, and to advise her of the differing legal and economic consequences of the purchase. She alleges that the defendants also breached the fiduciary obligations owed to her by failing to cease to act for her in circumstances where there was a possibility of a conflict between them and the plaintiff, given that they also acted for the Tonnas. It is the plaintiff's proposed claim that, had she been properly advised by the defendants, she would not have purchased the Galston property in the way that she did, but rather would have ensured that her purchase was not subject to any claim, entitling her to the full benefit of economic gains made in the Galston property.

8. [28]

   The plaintiff argues that leave to rely on the PFASoC should be granted, as there could be no unfair prejudice to the defendants if she were given that leave, whilst she would be irreparably prejudiced if leave was refused, and she was prevented from seeking relief for what are said to be breaches by the defendants of the terms of their retainer, duties of care, and fiduciary duties. She contends that her PFASoC does not raise matters that have already been considered by the Court, and there is no issue of estoppel or abuse of process.

The 2019 Judgment

1. [29]

   In her judgment, Ward CJ in Eq made numerous factual findings, which were foundational to her Honour's final disposition of the matter, and which are of direct relevance to the present proceedings. Ultimately, her Honour concluded that there was a resulting trust over the Galston property for the plaintiff's benefit and that of the Tonnas, in shares proportionate to the financial contribution each made to the purchase price. Her Honour rejected the plaintiff's claim that she purchased the property for her sole benefit, and also rejected her allegation that the Tonnas were in breach of a residential tenancy or licence entered into to permit them to reside at the Galston property.

2. [30]

   Her Honour found, at [408] - [409]:

3. [31]

   She continued at [436]:

4. [32]

   Later, at [474] - [478], her Honour said:

5. [33]

   As can be seen from the portions extracted from the 2019 judgment, findings of fact as to the intentions of the plaintiff and the Tonnas when contracting for the purchase of the Galston property were important; indeed, they might fairly be regarded as fundamental to her Honour's conclusions.

Determination

1. [34]

   In the ASoC filed by the plaintiff, she asserts the following in the pleadings and particulars to the claim:

2. [35]

   As is pointed out by the defendants’ motion, these particulars are inconsistent with and traverse the conclusions of Ward CJ in Eq.

3. [36]

   To that extent, the claim is, as the defendants submit and the plaintiff by her Motion seeking to file the PFASoC seems to acknowledge, one that cannot be maintained.

4. [37]

   The PFASoC, it is asserted, does not turn on the plaintiff's intention in making the purchase of the Galston property, but it is difficult to see how the question of her intention is other than a matter of considerable continuing relevance. Dr Mendonca says that, had she been better or differently advised, she may have formed a different intention, but that seems to be contrary to the evidence that she relied upon in the proceedings before Ward CJ in Eq, evidence that the plaintiff can now hardly resile from, even though her Honour did not entirely accept it. For example, at [93] - [94] her Honour observed that:

5. [38]

   At [128], her Honour summarised some of the plaintiff's evidence concerning her purchase of the Galston property, thus:

6. [39]

   The plaintiff's evidence on a number of issues was found by her Honour to be implausible, or lack credibility. Notwithstanding those conclusions, her Honour was satisfied that it was clear on the plaintiff's evidence that her interest in purchasing the Galston property was as an investment property (at [317]). She denied at all times any other intention in making the purchase.

7. [40]

   Against that background the plaintiff now proposes to claim that the defendants breached their contractual and common law duties of care to her. The plaintiff's claim as to causation relies upon the premise, not pleaded or particularised, of her intention. It is the unstated foundation of the PFASoC that the plaintiff’s firm intention was the acquisition of an investment property, an intention which was frustrated by the failures of the defendants. Necessarily, a critical part of the claim rests upon the asserted intentions, one which is contrary to the facts found by Ward CJ in Eq.

8. [41]

   To pursue that claim, it would be necessary to relitigate the issue of Dr Mendonca's intention in and understanding of her entry into the Amended Substitution Solution. It would also be necessary to advance a case that traversed the findings of Ward CJ in Eq to the effect that both the Tonnas and the plaintiff intended that the Tonnas would acquire an interest in the Galston property with the plaintiff's purchase of it.

9. [42]

   The plaintiff's assertion to the Court (not pleaded in the PFASoC) that, had she been properly advised she would have formed a different intention seems to contradict her own evidence in the 2019 proceedings as to an intention to acquire an investment property, and to rest upon speculation. It is not clear why the defendants were obliged under their retainer to advise the plaintiff to decline to participate in an arrangement through which she acquired an investment property, an acquisition made possible by the substantial financial contribution by the Tonnas, and from which she profited.

10. [43]

    I accept the submission of the defendants that:

11. [44]

    The plaintiff's PFASoC would necessarily assert factual matters that contradict or are inconsistent with findings of fact made by Ward CJ in Eq on the basis of the same evidence as would be advanced in the proposed case. The defendant argues, and I accept, that the plaintiff is estopped from doing so, in accordance with the principle first given in Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589; [1981] HCA 45.

12. [45]

    In Tomlinson v Ramsey Food Processing Pty Ltd (2005) 256 CLR 507, at [19] - [23]; [2015] HCA 28 the principle was discussed:

13. [46]

    It is issue estoppel and Anshun estoppel that precludes the plaintiff from advancing her PFASoC.

14. [47]

    Whilst the plaintiff has the right to pursue available legal remedies, the present claim could have been - and arguably should have been - advanced together with the earlier litigation. There was no cogent reason advanced to explain that failure.

15. [48]

    A single comprehensive action could have been brought by the plaintiff, and the whole efficiently determined in 2019, without need for the same witnesses to give evidence about the same factual matters years on, and without raising the possibility of differing and conflicting judgments emanating from the Court. Although the plaintiff contends that the defendants and the cause are different in the proposed claim to the defendants and cause in the 2019 claim, it is a distinction without a material difference, reliant as it is on the same factual circumstances, and evidence of the same witnesses. It is tolerably clear that the PFASoC is pleaded as it is to avoid the application of the principles of Anshun estoppel, which plainly bar the progress of the ASoC. As was said in Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 at [81] - [83]:

16. [49]

    To the extent that the defendants, despite the ease with which the plaintiff could have brought her claim against them in the 2019 proceedings, were not joined in the earlier action, and were not parties to the 2019 action, they rely upon a claim of abuse of process by the plaintiff. That is, in seeking to bring the proposed claim against the defendants, the plaintiff is seeking to re-litigate matters of fact already determined (adversely to her) in 2019, and this amounts to an abuse of process. The defendant points to an applicable passage from Reichel v Magrath (1889) 14 App Cas 665 at 668, quoted with approval in Rippon v Chilcotin Pty Lty & Ors [2001] NSWCA 142; (2001) 53 NSWLR 198, at 201-202:

17. [50]

    As in Rippon, the PFASoC is an attempt to re-litigate issues already decided in the 2019 judgment, and it raises the prospect of conflicting judgments, threatening the integrity of the administration of justice. That cannot be permitted.

18. [51]

    In my conclusion, the plaintiff is prevented by principles of Anshun estoppel from advancing the PFASoC or, in the alternative, it would be an abuse of process for her to do so.

19. [52]

    There are further issues connected with the expiration of the period in which the plaintiff may advance a claim against the defendants, but it is not necessary to consider that question.

20. [53]

    Leave to file the PFASoC must be refused.

21. [54]

    Since the plaintiff implicitly accepts that her ASoC is not a claim that she can advance, that claim must be struck out as an abuse of process pursuant to r 14.28(1)(2) of the Universal Civil Procedure Rules 2005.

22. [55]

    For these reasons the Court makes the following orders:

    1. (1)

       Leave to the plaintiff to file a Further Amended Statement of Claim is refused;

    2. (2)

       The Amended Statement of Claim filed on 15 July 2020 is struck out;

    3. (3)

       Subject to order (4), the plaintiff is to pay the defendants' costs as agreed or assessed;

    4. (4)

       If any party seeks a different order as to costs written submissions in support of such an order are to be filed via email to my Associate, and served, by 4pm on 28 May 2021; with any submissions in reply similarly filed and served by 4pm on 4 June 2021.